A COMPREHENSIVE STUDY ON REAL ESTATE

INDUSTRY LODHA GROUP

Submitted By

ROLL NO. -P05

SUBMITTED TO:

PROF.DR.PALLAVI CHANDWASKAR

DR. V. N. BEDEKAR INSTITUTE OF

MANAGEMENT
STUDIES, THANE

DECLARATION

i
This is to declare that the study presented by me to Dr. V.N. Bedekar Institute of Management
Studies, in completion of the Master in Management Studies (MMS) under the “A
COMPREHENSIVE STUDY ON REAL ESTATE INDUSTRY LODHA GROUP” has been
accomplished under the guidance of PROF.DR.PALLAVI CHANDWASKAR

SHIVAM BALMIKI

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 ACKNOWLEDGEMENT

My project on A COMPREHENSIVE STUDY ON REAL ESTATE INDUSTRY LODHA

GROUP has been a great learning experience. I was exposed to the different areas of research in
finance and gained valuable experience, which I will always recall with a sense of satisfaction
and pride.

This is to acknowledge Prof. Jay Bhatt under whose guidance I have been able to successfully
complete this project and effectively come to a very successful conclusion.

To all my colleagues who have helped me either directly or indirectly, I am grateful for their
valuable inputs. This project would not have been possible without their help.

SHIVAM BALMIKI

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 EXECUTIVE SUMMARY

The Project gives brief description on the real estate industry and the overall business scenario of
Lodha Groups. Major part of the project report is made keeping in mind the Indian real estate
market. The project consists of Industry analysis, Company analysis, etc. using strategic and
marketing tools such as PESTEL, SWOT analysis, BCG matrix, Porter’s five forces model etc. It
also helps us to understand the competitive dynamics of the industry through various parameters
under competitive analysis.

The project will also help to understand the drawbacks of Lodha Group’s business operations
along with meaningful recommendations. The project would thereby help in understanding the
real estate industry broadly with reference to Lodha Groups competitors. Project also talks
elaborately about the rapidly growing business prospects for the real estate industry in India and
how companies, especially Lodha Groups can leverage its market position against all weaknesses
and threats.

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SR.NO PARTICULARS

1 INTRODUCTION

2 OBJECTIVE OF STUDY

3 LITERATURE REVIEW

4 RESEARCH METHODOLOGY

5 FINDINGS

6 CONCLUSION

7 SUGGESTION & RECOMMENDATION

1. EINLEITUNG

Real Estate Sector

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The construction of commercial houses, residential housing, and business spaces, such as
hotels, restaurants, theaters, and industrial buildings, namely factories and government
buildings, are all covered by the real estate sector.

Real estate also involves activities such as the purchase, sale, and development of land.
Thus the real estate activities encompass both construction and housing sectors.
Real estate sector in India is expected to reach US$ 1 trillion by 2030. By 2025, it will
contribute13 per cent of the country‟s GDP.

Real Estate stock in India is expected to reach 3.7 million square feet in 2019, with
addition of 200 million square feet during the year.
Rapid urbanization bodes well for the sector. The number of Indians living in urban areas
is expected to reach 543 million by 2025. More than 70 per cent of India‟s GDP will be
contributed by the urban areas by 2020.
Construction is the fourth largest sector in terms of FDI inflows. FDI in the sector1 stood
at US$ 38.92 billion from April 2000 to December 2018. Government of India‟s Housing
for All initiative is expected to bring US$ 1.3 trillion investments in the housing sector by
the year 2025.

Graph 1: India‟s Real Estate Market forecast

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Graph 2: Urban Population in India estimated and forecasted

Graph 3: FDI inflow between Apr, 2000- Dec, 2018

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 1.1 Real Estate sector in India

Demand

 India is among the top 10 price appreciating housing markets internationally.

 Real estate has become a preferred asset class for investments.
 About 10 million people migrate to cities every year.

Attractive Opportunities

 Growing requirements of space from sectors such as education and healthcare,

ecommerce and logistics.

 Warehousing space in top eight Indian cities increased 22 per cent y-o-y in 2018 to
169 mn sq. ft. Investments of Rs 50,000 crore (US$ 7.76 billion) are expected in India‟s
warehousing between 2018-20.

 Growing demand of energy efficient and environment friendly architecture.

Increasing Investments

 Driven by increasing transparency and returns, private investments in the sector

have surged.

 Between 2009-18, Indian real estate sector attracted institutional investments

worth US$ 30 billion.

 Cross-border capital inflows to India‟s real estate sector have increased 600 per
cent .

Policy Support

 The government has allowed FDI of up to 100 per cent for townships and settlements
development projects.

 Under the Housing For All scheme, 60 million houses are to be built which include 40
million in rural areas and 20 million in urban area by 2022.

 Real Estate (Regulation and Development) Act (RERA) 2016 will make the sector
more transparent.

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1.2Market Trends and Overview

The urban housing shortage in India is estimated at around 10 million units* which is
being addressed through Pradhan Mantri AwasYojana (PMAY), Urban, under which
more than 6.85 million houses have been sanctioned up to December 2018.
Significant increase in real estate activity in cities like Indore, Raipur, Ahmedabad, Jaipur
and other 2-tier cities; this has opened new avenues of growth for the sector.
Relaxation in FDI norms for real est. sector has been done to boost real estate sector.
Government‟s plan to build 100 smart cities would reduce the migration of people to
metro and other developed cities.

Graph 4: Housing shortages in urban and rural region

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Segments in Real Estate Sector

There are several types of real estate, each with a unique purpose and utility. The main
categories are:
• Land

• Residential

• Commercial

• Industrial

Land:
Land is the baseline for all types of real property. Land typically refers to
undeveloped property and vacant land. Developers acquire land and combine it
with other properties (called assembly) and rezone it so they can increase the
density and increase the value of the property.

Residential:
Residential real estate consists of housing for individuals, families, or groups of
people. This is the most common type of estate and is the asset class that most
people are familiar with. Within residential, there are single-family homes,
apartments, condominiums, townhouses, and other types of living arrangements.

Commercial:
Commercial property refers to land and buildings that are used by businesses to
carry out their operations. Examples include shopping malls, individual stores,
office buildings, parking lots, medical centers, and hotels.

Industrial
Industrial real estate refers to land and buildings that are used by industrial
businesses for activities such as factories, mechanical productions, research and
development, construction, transportation, logistics, and warehousing.

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 Graph 6: Housing Price Index in India according to National Housing Bank

Expected demand to grow sharply

A localized, fragmented market presents opportunities for consolidation with only few
large, pan-Indian players such as DLF.
More foreign players might enter the market as FDI norms have eased.
Furthermore, norms on land acquisitions are expected to be relaxed.

Key Drivers

 Rapid urbanization.
 Growth in population.

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 Rise in the number of nuclear families.
 Easy availability of finance.
 Repatriation of NRIs and HNIs.
 Rise in disposable income.

Notable Trends

 Housing sales are expected to increase by 16 per cent year-on-year by 2018

end.
 NCR is expected to generate maximum demand in MIG and HIG category
followed by Bengaluru.
 Developers now focusing on affordable and midrange categories to meet the
huge demand.

Economic Growth along with growing urbanization

The Indian economy has experienced robust growth in the past decade and is expected
to be one of the fastest growing economies in the coming years.
India‟s urban population is expected to reach 543 million by 2025 from461 million
estimated in 2018.

Rising incomes and employment opportunities have led to more urbanization and
moreaffordability for real estate in cities.

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Graph 7: Housing demand supply for top cities

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1.4 Market Size
The Indian real estate market is expected to touch US$ 180 billion by 2020. The housing
sector alone contributes 5-6 per cent to the country's Gross Domestic Product (GDP).

In the period FY08-20, the market size of this sector is expected to increase at a Compound
Annual Growth Rate (CAGR) of 11.2 per cent. Retail, hospitality and commercial real estate
are also growing significantly, providing the much-needed infrastructure for India's growing
needs.

During the first nine months of 2015, PE funds invested about US$ 2.4 billion in the real
estate sector, across 53 transactions compared US$ 1.3 billion across 57 transactions in the
same period last year. Deal sizes have also increased in 2015, and residential projects both
luxury and affordable have attracted a substantial amount of capital.

Private Equity (PE) funds and Non-Banking Financial Companies (NBFCs) in India are seen
increasingly investing jointly in real estate projects, in order to hedge risk and undertake
bigger transactions.

Mumbai is the best city in India for commercial real estate investment, with returns of 12-19
per cent likely in the next five years, followed by Bangalore and Delhi-National Capital
Region (NCR). Also, Delhi-NCR was the biggest office market in India with 110 million sq.
ft., out of which 88 million sq. ft. were occupied. Sectors such as IT, retail, consulting and e-
commerce have registered high demand for office space in recent times.

India's office space absorption stood at 35 million sqft during 20152, which is the second
highest figure in the India's history after 2011, and was driven by corporate implementing
their growth plans.

India had the strongest activity in office leasing space in Asia and accounted for half of
Asia‟s total office leasing in third quarter of 2015, with Delhi being the most active market3.

Delhi‟s Central Business District (CBD) of Connaught Place has been ranked as the sixth
most expensive prime office market in the world with occupancy costs at US$ 160 per sq.ft
per annum.

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Current Scenario:

Housing demand fell 22% in H2 2019 amid slowdown in real estate market:

Unrelenting liquidity crisis, poor sentiment among homebuyers and faltering economic
growth hit the residential real estate market in the second half of 2019. While, new launches
plunged 30 per cent post-June, sales declined 22 per cent compared to the first half of the
year. Overall sales during 2019, however, inched up while new launches grew 21 per cent
year-on-year, as both developers and homebuyers enthusiastically invested in real estate
during the first half of 2019.

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Why the Real Estate sector is in a slump

1. Unattractive/Negative ROI:
The returns on investments in residential real estate have dropped from two to three
digit values to low single-digit or, in many locations, even negative returns over the
last few years. This naturally keeps investors at bay - and investors need to be in the
driver‟s seat for the market to revive. The ROI from housing currently clocks in at a
meager 2-3% even in the most favorable markets across Indian cities.

2. The Economic Slowdown:

This has a direct correlation to employment creation and job security in India.
Cashconservation is the order of the day in a country where citizens are unsure of
getting jobs, or job continuity. Torpor in the economy and ensuing job insecurity is a
sure-fire consumption killer.

3. Lack of Faith in Under-construction Properties:

The massive burden of heavily delayed and terminally stuck housing projects on the
market is both a cause and effect when it comes to low homebuyer sentiment.
Underconstruction homes were previously Indian homebuyers' default choice due to
the more competitive prices.

4. The Anticipation of a Significant Price Correction:

Both end-users and certainly investors are interested in putting money into a
depreciating asset. They would rather wait for prices to sink to their 'lowest best'. The
fact that housing prices have already bottomed out does not register since the sector is
widely perceived to be in such turmoil that further price corrections seem inevitable.

The sales currently being registered are largely to end-users who got good deals and
were tired of waiting. However, the bulk of buyers who could tip the scales in favor
of a convincing housing revival prefer to wait and watch in a market where renting
homes is cheap.

5. Unfavorable Loan-to-Value Ratio:

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Moving cautiously, RBI has laid down stricter norms and guidelines for banks
dispensing housing loans. In recent times, the loan-to-value (LTV) ratio - the amount
of loan that can be given for a property of a certain market value – is now restricted to
70%, whereas it previously ranged between 80% and even 90% of the property value.
In short, buyers availing home loans now have to pay 30% of the property cost
upfront.

When too many aspiring buyers either don't have that kind of money on hand or
prefer to hoard it because of uncertain economic headwinds, sales will fall. Both the
real estate and automobile industries fall prey to the same dynamic of cash-
conservativeness. To add to this, NBFCs/HFCs have also slowed down their lending
to individual homebuyers.

6. High Taxation on Under-construction Homes:

GST has replaced the multiple levels of taxation previously applicable on a home
purchase, but the increased simplicity has not resulted in better cost-efficiency.
Underconstruction homes attract 5% GST for premium (mid-range) properties and
1% for affordable homes. However, this does not include ITC benefits, which would
have reduced the overall purchase cost. Over and above, 5-7% stamp duty and
registration charges apply to both under-construction and ready-to-move homes but
the cumulative extra cost on under-construction homes effectively negates most of the
price advantage they used to offer. Not surprisingly, most housing purchases today
are in ready-to-move properties which do not attract any GST. However, developers
need working capital to complete their ongoing projects. The lack of buyer interest
for under-construction homes deprives developers of one of the previously
'traditional' funding routes - interest-free capital raised directly from the market. This
dynamic perpetuates the vicious cycle of the overall slowdown in the sector - buyers
are averse to investing in under-construction homes, projects get delayed because of
lack of funding, and slow or no construction progress further dampens buyer
sentiment.

7. Stagnant Job Market:

The problem of low job creation looms large in India, even though the economic
growth rate is predicted to be the highest. The Periodic Labor Force Survey (PLFS)
by the National Sample Survey Office (NSSO) maintained that the unemployment
rate in both urban and rural India combined stood at 6.1% in FY18. A stagnant formal
job market has a direct impact on the sentiment of homebuyers who have to make
large investments in buying a residential property. The job market situation will
eventually improve, but not overnight.

8. Millennials’ ‘No-guilt’ Towards Renting:

Baby boomers and Generation X denizens who desired to own homes tend to already
own them. Millennials are now the prime target clientele for buying homes.

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Homeownership continues to be desirable for most Indians, but the driving reasons
are more related to financial security and freedom from rent rather than for
investment ROI or obtaining a status symbol. The meagre appreciation of housing
over the last 2-3 years and low rental yields of 2-3% tell their own story.
Simultaneously, the status perception of homeownership has faded - especially with
on-the-move millennials who prefer to rent homes in convenient locations in
whatever city they happen to be.

9. Demonetization Killed the Cash Component:

In earlier years, real estate was the preferred means for parking unaccounted wealth.
The possibility of involving large cash components was a big factor that drove
housing sales to investors. Demonetization has not eliminated this practice as
intended. However, the predominantly salaried middle-class does not generate black
money and now prefers to transact via transparent official channels - and end-user
sales alone are not enough to revive the housing sector.

10. Growing Awareness of Other Investment Options:

In the „golden years‟ of India‟s housing market, property was the default go-to option
for big-ticket investment. With real estate's fading allure, investors began exploring
other options and found them to quite rewarding. For instance, they can invest in a
start-up with sums as 'low' as INR 10 lakhs. Many entrepreneurially-inclined Indians
find the potential ROI (as high as 15% in many instances) makes more sense.

Example: Mutual funds provide good returns and the entry level is low enough to be
affordable to many.

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2. Industry Analysis

2.1 Political, Economic, Socio-Cultural, Technological, Environmental,

Legal Analysis (PESTEL)

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PESTEL is a framework used by marketers to analyze and monitor the macro-environmental
factors that have an impact on an organization.

Political factors:

These are all about how and to what degree a government intervenes in the economy.

Economic factors:

They have a significant impact on how an organization does business and how profitable they
are.

Social factors:

They are also known as socio-cultural factors. These are the areas that involve the shared
beliefs and attitudes of the population.

Technological factors:

They affect marketing and the management in 3 distinct ways

 New ways of producing goods & services

 New ways of distributing goods & services New ways
of communicating with target markets.

Environmental factors:

They have become important due to increasing scarcity of raw materials, pollution targets
doing business as an ethical and sustainable company, carbon footprints target set by
government. These are some of the factors marketers are facing within this factor.

Legal factors:

These factors include the laws and regulations imposed by the government.

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POLITICAL FACTORS

India’s PM approved the launch of Housing for All by 2022.

The Pradhan Mantra Awas Yojana (PMAY) aims to provide housing for all by 2022
and is being implemented from June 2015. PMAY provides central assistance to
Urban Local Bodies (ULBs) and other implementing agencies through States/UTs
for in-situ rehabilitation of existing slum dwellers using land as a resource with
private participation; credit linked subsidy, affordable housing in partnership and
subsidy for beneficiary-led individual house construction/enhancement.

One can avail PMAY linked loans from any primary lending institutions such as
scheduled commercial banks, housing finance companies, Regional Rural Banks s),
State Cooperative Banks, Urban Cooperative Banks, Small Finance Banks, Non-
Banking Financial Company etc. There will not be any processing charge for eligible
housing loan amount as per income criteria under the Scheme. For additional loan
amounts beyond the eligible loan amounts for interest subsidy lenders can charge the
normal processing fees.

Make in India initiative.

“Make in India” is an ambitious campaign launched by the country‟s Prime Minister,

Mr. Narendra Modi. The campaign was launched with intent of turning India into a
global manufacturing hub. The campaign seeks investments in 25 sectors across the
country from foreign investors as well as home grown businesses. Some of the key
industries in focus include construction, automobiles, tourism and hospitality. The
country‟s real estate sector, which is a part of the construction, is expected to be
significantly impacted with the investments.
The Indian construction industry contributes more than 10 per cent to the
country‟sGDP. The industry sees sustained demand from the real estate and
industrial sectors. While 50% of the demand for construction activities comes from
the infrastructure sector, the remaining demand comes from industrial activities,
residential and commercial development. This clearly states the huge opportunities
for the real estate sector in future.

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Securities & Exchange Board of India (SEBI) has proposed
easierregulations for realestate investment trusts (REITS).

The Securities and Exchange Board of India (SEBI) has given its approval for the
Real Estate Investment Trust (REIT) platform which will help in allowing all kinds
of investors to invest in the Indian real estate market. It would create an opportunity
worth Rs 1.25 trillion (US$ 19.65 billion) in the Indian market over the years.
Responding to an increasingly well-informed consumer base and, bearing in mind
the aspect of globalization, Indian real estate developers have shifted gears and
accepted fresh challenges.

Land Acquisition act 2015

The Land Acquisition Bill 2015 will act as a great boon for real estate sector. It will
directly affect the real estate in India, because it will make the process of land
acquisition easy, so that the acquired land can be used in development of industrial
areas and major highways and expressways. This Bill affects the real estate business,
especially the planned infrastructures like roads, airports andresidential housing
projectsin India.

Earlier projects got delayed because of the amendments and bylaws, this delay
caused for projects getting stalled and some of them were totally wiped out. With the
inclusion of the new act, things will move faster, companies can assess the land and
build new projects. This new Bill will directly benefit the real estate industry as it
will see a big boom with an increase in number of projects and the passing of land
for ongoing projects in India. The new Bill gives the companies to directly negotiate
with the seller, and avoid a lot of red tape, and a lot of government paper work. This
will help for the deals to mature faster and the work to be carried on smoothly.

FDI

100% FDI through the automatic route is permitted in the following construction
(development) projects:
 Development of townships
Construction of residential/commercial premises

 Construction of roads or bridges.

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  Construction of hotels, resorts.
 Construction of hospitals, educational institutions. Construction of recreational
facilities

 Construction of city and regional level infrastructure

 FDI Limit for real estate projects within Special Economic Zones (SEZs) raised to
100%.
 FDI limit for industrial parks under the automatic entry route is 100%.

AMRUT

The purpose of the Atal Mission for Rejuvenation and Urban Transformation
(AMRUT) is to:
Ensure that every household has access to a tap with assured supply of water and a
sewerage connection
Increase the amenity value of cities by developing greenery and well maintained
open spaces (e.g. parks)
Reduce pollution by switching to public transport or constructing facilities for non-
motorized transport
US$ 858mn was the budget allocation in the Union Budget 2018-19 for the AMRUT
scheme.
Many of the government schemes related to construction converge in their goals,
although the path they choose may be different. There is a strong link between
AMRUT and the Smart Cities mission – while AMRUT aims to achieve urban
transformation using the project-based approach, the Smart Cities Mission follows
an area-based strategy.
For schemes in the construction industry to be effectively planned and implemented,
cities must seek convergence between the State/Central Government
Programs/Schemes and AMRUT, Swachh Bharat Mission, Digital India, Skill
development, Housing for All, etc.

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ECONOMIC
 Interest Rates
Interest rates also have a major impact on the real estate markets. If you're
considering buying a home with a mortgage it is beneficial to research interest rates
using a mortgage calculator. Changes in interest rates can greatly influence a
person's ability to purchase a residential property. That is because the lower interest
rates go, the lower the cost to obtain a mortgage to buy a home will be, which creates
a higher demand for real estate, which again pushes prices up.
 Inflation
Inflation has a deep impact on the performance of thereal estatesector. For instance,
when inflation rises, commercial banks are likely to raise interest rates. Similarly,
landlords are less likely to rent out properties if inflation is unpredictable. The reason
is that it is difficult to renegotiate agreements with tenants when inflation is high.
Real estate investors also adjust for inflation while assessing how real estate prices
have risen over years. When inflation is high, it may seem that real estate prices are
rising, though in “real terms”, prices are falling.

 Unemployment
As unemployment rises, more and more potential purchasers are removed from the
market resulting in a decrease in demand. More and more potential buyers are being
removed from the housing market thereby decreasing demand significantly.

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SOCIO-CULTURAL FACTORS

Adaptation of Nuclear Family

In the traditional Indian joint family set-up, many people lived in the same house
with their individual families. However, the traditional Indian concept of the joint
family has seen a radical change. Nuclear families are now the norm, rather than the
exception. Usually, a nuclear family consists of a couple and their children. Nuclear
families do not require as much space, as a joint family. Consequently, the property
buying decisions of a nuclear family, are radically different from those of a joint
family, both, in terms of the people who take the decisions and the choices that are
made.

Crime Risk
Everyone wants to live in a good neighborhood where they can feel safe and secure.
However, some areas are more subject to criminal activities than others.

Localcrime ratescan be easily overlooked by investors, even though they impact risk
exposure, real estate values, and investment and insurance rates. Furthermore,
different thieves tackle different areas, so more professional thieves will target
affluent homes just as there is plenty of low-level crime in less privileged areas.

Increase in double income families

There has been a rapid increase in families where both male and female are
employed which enhances their purchasing capacity. This has increased the demand
for affordable housing in the recent years.

High-Paying Jobs and Opportunities

Job growth is one of the biggest factors in choosing an investment location. Simply
put, if employers aren‟t hiring and people can‟t find good jobs, they aren‟t going to
buy or rent a home in that specific location.

Amenities
Your target location‟s amenities, such as quality schools, educated neighbors, nice
architecture, or an ocean view, will increase your investment‟s value.

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Population Growth
Typically, population growth is a result of other favorable factors, such as a low
unemployment rate, anaffordable cost of living, entrepreneurship, and access to a
wide range of industries, to name a few. Simply put, if people are moving to an area,
the number of potential buyers and tenants goes up.
Targeting areas with a rising population and growing housing demand will increase
the likelihood that your property will appreciate. And likewise, growth translates into
shortages of rental inventory and rising rents. For buy and holds, rising rent means
better cash flow and higher profits.

TECHNOLOGICAL FACTORS
Use of internet booking, renting & buying property online (99acrescom, etc.)
Real estate online portals have now evolved to provide a data-backed analysis of
each and every micro market with minute details of the property. They are now
emerging as a one-stop destination for not only buying property, but also advice on
getting finance and preparation of rent agreements. This provides the customers an
ease on deciding on the property.

Virtual Property Showcases

Typically, clients visit multiple properties before deciding on the one they want. This
requires a lot of time and things get complicated if a property is far from where a
client lives. In this case, visiting a property is not only time-consuming but can be
expensive.

VR technology helps solve these problems, allowing millions of people to virtually

visit properties without leaving their homes. Simply put on a VR headset and you
can experience immersive, three-dimensional walkthroughs of properties. In a matter
of minutes, potential buyers or renters can virtually visit dozens of locations and
decide which are worth visiting in person.

Change in construction pattern, high raised earthquake resistant

buildings.
Earthquake resistant structures are structures designed to withstand earthquakes.
While no structure can be entirely immune to damage from earthquakes, the goal of

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earthquake resistant construction is to erect structures that fare better during seismic
activity than their conventional counterpart.

Studio apartments are in trend.

Families in metropolitans find studio apartments as a smart way of investment
without compromising on the needs and cost efficient.

ENVIRONMENTAL FACTORS

Location
The property boundaries and neighboring properties matter too. How well the
location fits in with the surrounding properties, is the property being used in a way
that makes financial sense given the surrounding property types, and do the
neighboring properties add value to the location or not, these factors matter too.

Topography
The topography of an area can have a huge impact on real estate development and
can be a crucial factor in a market analysis. Topography can influence issues such as
runoff and flooding hazards as well as availability of land for development. Areas in
the Mid-west have large, flat plots of land that would be easy to develop. On the
other hand, areas on the west coast have a limited amount of land along the coast that
can be developed. California has little flat ground between the Pacific Ocean and the
mountains, so people are forced to develop into the sides of mountains.

Soil Conditions
The market analysis may also contain information about the soil conditions of the
subject property, especially when they are relevant to the planned use or value of the
property. Soil conditions are most important when the planned land use involved
growing crops or other vegetation. Ideal soil types should also provide adequate
drainage and be able to support the structure without slippage that can cause cracks
in the foundation.

Climate
To a certain extent, climate is important in any market analysis. Climate may be
directly relevant to income if the subject property is a resort or entertainment facility.
Climate, however, is also important to understanding the demand for real estate and
economic drivers of an area. Locations with warmer weather and mild winters tend
to attract people and businesses. Therefore, population and economic growth tend to
be higher in these areas.

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Natural Resources
Historically, cities grew in locations with important natural resources. Today,
natural resources are still major economic drivers of industry and employment
opportunities. Natural resources can serve as an important economic factor for
transportation (rivers or seaports), mining (natural gas, coal, oil, etc.), or tourism
(beaches and mountains).

Water availability
Water availability is not only important for factories or farmlands requiring water for
business but also for all economic stability in an area. A city without adequate water
resources and water quality faces poor economic growth prospects. This in turn
influences the overall real estate market forecasts for a location.

Transportation facilities
Current transportation patterns and proposed changes to those patterns are critical
components of a market analysis. Traffic patterns determine the travel paths for the
population and thus the areas that will receive the highest concentration of potential
client activity. Traffic patterns are especially important for tenants whose business
requires a high amount of foot traffic and visibility. A location along a major
roadway can represent a much higher demand then the neighboring population
would otherwise suggest.

LEGAL
Depreciation
Depreciation is the decline in value of an asset over time. But, in real estate sector,
depreciation doesn‟t naturally occur. This provides the investor and construction
companies an opportunity to invest with lower risks.

Restrictions on non-cash transactions

As per the tax law formulated by the Central Board of Direct Taxes (CBDT), which
is effective from June 1, 2015, any transaction in real estate including agriculture
land shall be required to be made through account payee cheque or real-time gross
settlement (RTGS) or electronic funds transfer, if the amount is Rs.20,000 or above,
If the cash transaction beyond the limit is done, then a penalty of an amount equal
under Section 271 D of Income Tax Act will be imposed on a seller who accepts
cash or refund of advance is made in cash by the seller of the property.

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 GST
Under the GST regime (revised), promoters are to pay 1% (without input tax credit)
GST in case of affordable houses and 5% (without input tax credit) on construction
of houses other than affordable houses.24 Commercial properties will continue at the
same GST rate of 12% with input tax credit.

GST is not applicable to completed and ready-to-move-in projects, as there are no

indirect taxes applicable in the sale of such properties.

RERA
The Real Estate Regulation and Development Act (RERA), 2016, set up in
November 2016, aims to reform the real estate sector in India by encouraging greater
transparency, citizen centricity, accountability and financial discipline- 25.

The act will also protect consumers by creating an online system for information
sharing so that a mutual trust can develop between developers and buyers and to
facilitate timely completion of projects.

2.2 Porter’s 5 force Model

It is an analysis tool that uses five industry forces to determine the intensity of
competition in an industry and its profitability level.

Threat of new entrants:

Determines how easy it is to enter a particular industry. If an industry is profitable
and there are a few barriers to enter. Rivalry soon intensifies with increase in number
of organizations, profit falls.

Bargaining power of suppliers:

Strong bargaining power allows suppliers to sell higher priced or low quality raw
materials to their buyers. This affects the buying firm‟s profits because it has to pay
more for materials.

Bargaining power of buyers:

Buyers have the power to demand lower price or higher product quality from the
industry producers when their bargaining power is strong. Lower prices means lower
revenue for the produces produced by producers, while higher quality produces
usually raise production costs.

Threat of substitutes:

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This force is especially threatening when buyers can easily find substitute products
with attractive prices or better quality and when buyers can switch from one product
or service to another with little cost.

Rivalry amongst existing competitors:

This force is a major determinant on how competitive and profitable an industry is.
In competitive industry firms have to compete aggressively for a market share,
which results in lower profits.

Porter‟s 5 factor model

Threat of new entrants- Low

Initial investment in setting up a real estate company is very high since the raw
material costs have to be arranged by the developer in the earlier stage i.e. there is no
advance payment from the customer. New players in this sector find it difficult to

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win projects since the real estate sector projects also consider the track record of the
developer. Economic downturn across the globe and increase in the number of real
estate construction and development companies has reduced the profitability of the
business. Cost reduction plans in terms of real estate for office space are being
carried out by many companies. So this is kind of a dampener for new companies as
well as existing companies. The new players in this sector are expected to be
affected the most. On account of the above points, there is weak/low threat of new
entrants.

Bargaining power of buyers- Moderate

The products (i.e. real estate space) are standardized. Switching costs are very high.
People look for developers with good track record i.e. brand identity. The bargaining
power of buyers was low. But because of poor economic condition of 2013 and
2014, the property rates were unaffordable to the people of the country. RBI has
disallowed the 80:20 Ponzi scheme being run by real estate developers. Also the
property rates were too high sellers were not ready to bring down the prices. So the
real estate sector became cash crunched. This resulted in builders trying to woo
buyers with discounts and offers.

The bargaining power of buyers which was low earlier, later on it increased and now
can be termed as moderate.

Bargaining power of suppliers- Low

There is lower switching cost in changing suppliers for raw material (cement, bricks,
paint, etc.). There is negligible threat of forward integration by suppliers. There are a
large number of suppliers of raw materials for the real estate companies. The
bargaining power of suppliers is low in this case.

Threat of substitutes- Moderate

The customers may opt for a house on rent if they are not able to afford to buy the
property. From that point of view the threat of substitutes here is moderate.

Intensity of rivalry- High

The intensity of rivalry is high e.g.: Piramal, Runwal, Rustamjee, Hiranandani, DLF,
Indiabulls, etc. This is because the zone is currently under development and a lot of
real estate companies have invested into it. There are a number of projects coming
up in the area and at competitive prices too. There is minimal profitability
considering the status of current economy and so only companies with high cash
reserves would survive.

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From the analysis we can conclude that the company stands reasonably well
considering the factors like moderate bargaining power of buyers and moderate
threat of substitutes. As the bargaining power of the suppliers is low this means that
the company has an upper hand when it comes to purchasing the raw materials. The
intensity of rivalry is high which explains the competition is fierce in the area
amongst the competitors and it isn‟t easy to capture the market.

3. Objective of the study

• To study the current scenario in the real estate sector.

• To understand government schemes affecting real estate sector.

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Company Profile

Introduction to Lodha Group

Established in 1980, the Lodha Group is Mumbai's premier real estate developer.
The Group is currently developing in excess of 35 million sq. of prime real estate,
with over 30 projects in and around Mumbai, from Napean Sea Road to Dombivali.
The Group has further extended its promise of luxury living with successful projects
In Hyderabad and Pune.

The Lodha Group has several landmark developments to its credit, including World
One - the world's tallest residential tower, Lodha Bellissimo - the only Indian
residential development to feature amongst the top 1000 landscapes in the world, and
Palava – India's most livable city, spread over 4000 acres and located close to the
upcoming Navi Mumbai internationalairport.

The Group has also made history by recording the biggest land deal in India till date,
buying a plot in Wadala for `4,053 crore, from the Mumbai Metropolitan Region
Development Authority (MMRDA).

Lodha Group has achieved net sales (in India) of over INR 7,163 crore in FY 17-18.
They have successfully delivered a staggering 19,670 homes over the last 2 years
(FY 17-18 and FY 18-19), of which 15,800 homes were delivered before time, i.e.
every 4 out of 5 homes were delivered before time.

Pioneering new trends in the market, the Group introduced CASA by Lodha,
offering the mid- income consumer luxury homes within easy reach. The Group also
introduced the concept of branded office spaces, with offerings at every level, from
world-class corporate offices to largescale office campuses to signature boutique
offices for growing businesses.

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4.1 Top Level Management
Founder: Mangal Prabhat LodhaCEO & MD: Abhishek M. Lodha

Management Team of Lodha Groups

President – Design: DEEPAK C.

He holds Bachelor‟s Degree in Architecture from University of Mumbai. He joined

the Lodha Group in 2007. He has 23 years of experience in design and development.
Prior to joining Lodha, he was the Senior Architect at Oberoi Constructions Private
Limited, the Founder Member and Director at Collage Architects and Interior
Designers Private Limited.

President – Legal: GOPAL M.

He holds a Master‟s as well as Bachelor‟s Degree in Law and a Bachelor‟s Degree

in Commerce from the University of Mumbai, and is a qualified company secretary.
He provides legal framework support and advises the Lodha Group on strategic
issues. He has over 30 years of experience in the areas of litigation and dispute
resolution. Prior to joining Lodha Group, he has held senior positions at Reliance
Industries Limited and has practiced independently for several years, handling issues
relating to constitution, excise, customs, property and labour issues and criminal
issues. His portfolio of responsibilities includes all types of litigation, arbitration in
India and abroad, intellectual property work, legal and commercial due diligence
among others.

Chief Financial Officer: JAYANT M.

34
He holds a Bachelor's Degree in Commerce from University of Calcutta. He is a
qualified chartered accountant and cost and works accountant.

He has over 30 years of experience of multi-industry and cross functional experience

in the areas of banking and finance. He is involved in financial control system. Prior
to joining Lodha Group, he was the Chief Financial Officer, and a part of the senior
management team at ING Vysya Bank; the Chief Financial Officer of IDBI Bank
Limited; a Senior Vice President, Finance and Planning at Industrial Bank of Oman;
and as General Manager and Financial Controller with Peregrine Capital India
Private Limited. He has also held positions at Tata Tea Limited.

Executive Vice President – Human Resources: JANHAVI S.

She holds a Master‟s Degree in Labour Studies from Mumbai University and a
Bachelor‟s
Degree in Arts (Sociology – Honours) from St. Xavier‟s College. She has over 20
years‟ experience in the area of Human Resources both within India and in Europe.
She joined the Lodha Group in 2012 and has previously been associated with
Greenpeace International, Sanofi Aventis and Glaxo India.

Chief Sales Officer: PRASHANT B.

He holds a Bachelor's Degree in Engineering (Mechanical) from Thapar Institute of

Engineering and Technology, Patiala and a Master‟s Degree in post graduate
Diploma in Business Management from the Institute of Management Technology,
Ghaziabad. Further, he has also completed the General Management Program
„Bottling Business School‟ from Indian Institute of Management, Ahmedabad. Prior
to joining Lodha Group, he was a Chief Executive Officer at
Spice Mobility Limited; a Senior Vice President and Head of Sales, Business
Development, Membership and Marketing at Walmart India (Cash and Carry); and
Vice President – Operations at Hindustan Coca Cola Beverages; and has also worked
with Cadbury in China.

Chief Marketing Officer: VIRAL O.

He holds a bachelor‟s Degree in Commerce from Narsee Monjee College of

Commerce and Economics, Mumbai and Master‟s Degree in Management Studies
from Narsee Monjee Institute of Management Studies, Mumbai.

35
Prior to joining Lodha Group, he worked with Bennett Coleman & Company
Limited and was a Marketing Director at Nokia UK. He was also the Regional
Marketing Manager, skin, for Africa, Middle East and Turkey at Unilever.

The Group's tremendous success has been marked by financial investments from the
finest global investors, including JP Morgan, Deutsche Bank, HDFC Ventures and
ICICI Ventures and State Bank of India.

The Group currently employs over 3100 associates and provides site-based
employment to over 25,000 workers. And going beyond its role as a premier real
estate developer, the Lodha Group has been a socially responsible corporate,
focusing on education as the best medium to enrich society.

• Lodha Groups has many properties catering to the various segments of

the society.
• Affordable housing
• Township Projects

• Luxury Projects

• Commercial Projects

• Crown Taloja

• Upper Thane

Township Projects:
• Lodha New Cuffe Parade

• Lodha Park- Worli Luxury Projects:

• The World Towers- Worli

• Lodha Marquise- Worli

• Trump Tower Mumbai Commercial Projects:

• One Lodha Place, Lower Parel

• Lodha Supremus, Thane

• Codename Business Gain, NCP

Smart City:-PALAVA

36
 The property is built on a 4500-acre land located between Thane
Navi
Mumbai and Kalyan. Palava City is also referred to as the City of Opportunity. It
was listed as India's No.1 smart city by Jones Lang LaSalle India's proprietary
research report. The first phase of Palava City, spread over approximately 300 acres,
was completed in 2016. By 2016, the company had sold 1350 homes worth Rs 690
crore within the township of Palava. The handover of 18,026 units to the customers
was completed by December 2017. The second phase of the development began in
2014. Palava is spread over 4500 acres, it‟s a smart city with a "walk to work"
concept. Palava will soon have 7 million sq. feet of workspaces to support 1, 00,000
quality jobs. Offices of HDCF Bank are operational.

The entire project is expected to be completed over 4 phases by the year 2025.

5. Company Analysis

5.1 Strength, Weakness, Opportunity, Threat Analysis (SWOT)

SWOT analysis is a framework used to evaluate a company‟s competitive position

and to develop strategic planning. SWOT analysis assesses internal and external
factors, as well as current and future potential.

Strengths describe what an organization excels at and what separated it from the
competition.

Weaknesses stop an organization from performing at its optimum level. They are the
areas where the business needs to improve to remain competitive.

Opportunities refer to favorable external factors that could give an organization a

competitive advantage.

37
SWOT analysis of Lodha Group analyses the brand/company with its strengths,
weaknesses, opportunities & threats. In Lodha Group SWOT Analysis, the strengths
and weaknesses are the internal factors whereas opportunities and threats are the
external factors.

SWOT Analysis is a proven management framework which enables a brand like

Lodha Group to benchmarkits business & performance as compared to the
competitors and industry. Lodha Group is one of the leading brands in the real estate
and construction sector. The table below also lists the top Lodha Group competitors
and elaborates Lodha Group market segmentation, target group, positioning &
Unique Selling Proposition (USP).

Strength:
• Mumbai‟s premier real estate developer.

• Decades of experience in the field along with excellent operational

efficiency.

• Unique branding strategy and marketing exercises.

• Location of the projects and head quartered at Mumbai adds value.

• Many prominent national and international awards and tie-ups with

international architects.

Weakness:

38
 • Imaged as expensive and premium causes absence in middle class
category.

Opportunity:
• Expansion in other parts of India.

• Tax incentives for real estate investment.

• Reduction in interest rates.

Threats:
• Changes in political situations: For instance, Demonetization struck the
company hard as there wasn‟t enough money in the market for activities.
• Current dip in the real estate market: The real estate sector is current
experiencing a slowdown. This has caused a lot of big players in the industry
to shut down.
• Lack of data security: The data safety remains a threat in almost all
organizations. There are chances of cyber hacks to steal the data from the
company servers.

5.2 Value Chain Analysis

Value Chain Analysis is a process where a firm identifies its primary support
activities that add value to its final product and then analyze these activities to
reduce costs and/ or increase differentiation. Value Chain represents the internal
activities a firm engages in when transforming inputs into outputs.

Inbound Logistics: This is how materials and resources are gained from suppliers
before the final product or service can be developed.

Operations: Operations are how the materials and resources are produced, resulting
in a final product or service.

39
 Outbound Logistics: Once a product or service is finished, it needs to be distributed.
Outbound logistics describes this delivery process.

Marketing and Sales: This is how your product or service is presented and sold to
your ideal target market.

Service: This is the support a business provides for the customer which can include
support and training for the product, warranties, and guarantees.

Value Chain analysis of the company is as follows:

Inbound Logistics: The material is directly bought from the dealers to reduce the
intermediate charges. These materials include sand, cement, construction bars
concrete bricks, safety equipments (scaffolding, helmets, goggles, ear plugs, gloves
etc.)

Also, material like stationary, print cartridge and other office equipments are bought
from their respective dealers to reduce costing.

Operations: These include planning and execution of the construction activities. The
company initially seeks for land acquisition. It then seeks for the government
permission for setting up their project in the area. The project is planned thereafter
and resources are obtained, keeping in mind the price constraint. This is followed by
the construction activity and approval of the collector for the buildings which are
constructed.

40
Marketing and sales:

Calling: The calling team gathers the data from various databases and websites like
99acres, common floor,etc. and tries to get the potential customers to the
construction site from where the company‟s sales person take over.

If the customer has issues regarding coming down to the project , the sales person
goes to the places convenient to them and provide them with a proper presentation of
the company and the project.

The Company has ties with a number of real estate brokers, (also called as CPs). The
CPs sell the properties and charge a fraction of the property cost.

The Support activities are managed by the CRM (Customer Relationship

Management) team. The CRM team helps customers resolving disputes (if any), and
coordinates with the sales team accordingly. The CRM also maintains a record of the
flats sold and the customer details.

5.4 ANSOFF’S MATRIX

The Ansoff Matrix is a strategic planning tool that provides a framework to help
executives, senior managers, and marketers devise strategies for future growth. It is
named after Russian AmericanIgor Ansoff, an applied mathematician and business
manager, who created the concept.

Like any other corporate company, Lodha Groups also uses this tool to ensure their
business growth and also to understand where they stand. The company analysis the
risks in the market with the help of the matrix and makes the business plans and
strategies accordingly.

41
Market Penetration

In market penetration strategy, the organization tries to grow using its existing
offerings (products and services) in existing markets. In other words, it tries to
increase its market share in current market scenario. This involves increasing market
share within existing market segments. This can be achieved by selling more
products or services to established customers or by finding new customers within
existing markets. Here, the company seeks increased sales for its present products in
its present markets through more aggressive promotion and distribution. Lodha
Group gives outstanding after sales services and thus they get customer confident
and then they try to get customer referrals from them.

Market development
In market development strategy, a firm tries to expand into new markets
(geographies, countries etc.) using its existing offerings and also, with minimal
product/services development. Lodha Group entered the Dombivili market by their
Dream project PALAVA. By entering these new market/location they are trying to
widespread their geographical presence .They are targeting similar target audience in
different markets to expand their business all over. The channels they use to market
their company is more or less the same as their primary market.

Diversification

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 Diversification is the riskiest of the four options, because it is about introducing a
new, unproven product into an entirely new market that you may not fully
understand. Currently the company is not thinking to diversify in any way. They may
have plans to do so in the near future.

Product Development
In product development strategy, a company tries to create new products and
services targeted at its existing markets to achieve growth. This involves extending
the product range available to the firm's existing markets. Lodha Group has
introduced various commercial projects in their existing market. They are coming up
with Lodha Supremus, Thane and One Lodha Place, Lower Parel they also have
many more upcoming projects which are going to be launched in their existing
markets.

6.1 Learning and Finding

Indian economy is expected to be one of the fastest growing economies in coming
year. Indian real estate sector is expected to reach a market size of US $1 trillion by
2030, in which Mumbai and Bangalore is rated as hottest destinations in Asia.
Relaxing FDI norms can help real estate sector to boom once again.

22% of fall is seen in second half of 2019 due to unattractive ROI, Lack of faith in
Underconstruction projects. Porter's 5 force model explains that in real estate the
possibility of new entrant is quite low, bargaining chances of consumers are
relatively moderate so as of suppliers. Consumers can substitute their buying
decisions to rented one.

43
From Lodha Group:
It is observed that Lodha Group is Mumbai's premier real estate developers. They
have named several landmark developments like Lodha World Tower, Lodha
Marquise, Trump Tower Mumbai, etc.

PALAVA – “Indian's most livable city”1 st Smart City of India, Lodha Group has
named many properties to varies segment of Palava, affordable housing, luxury
project, commercial. This project made Lodha world‟s largest developer.

Lodha Group strategy is to market through various channels but focus mainly on
outdoor marketing. They have properly assigned their work to different departments
to maintain proper work for its employees following a proper set of process and
procedures to follow and accomplish their work.

Recommendation to Lodha Group:

It is being observed that the policies of Lodha Groups are not reliable for customers,
Organization should pay attention to it and improve their policies in the areas like
Payment schedules and sales agreement policy.

Conclusion:
Real estate is considered to be one of the most volatile industries where steady
growth is desirable but it is hard to achieve. The main objective behind the study of
real estate was to understand the working of the industry and to see the growth of the
industry in near future. Accordingly, we can draw some conclusions based on study.

Real estate is an industry with the capability to give high return on investment.
However, it was not looking favorable in past couple of years (2016-19); it is
expected to move in the right direction as government has taken measure to improve
the sector by providing relief in taxation for corporate, and loan schemes from bank
to Developers and to customers as well.

44
Due to regulations like RERA act, Transparency in real estate sector has increased.
Big players like Piramal, Rustomjee, Oberoi Reality, Godrej and Hiranandani are
practicing fair means of transaction which eventually is a benefit to the end users.
These acts are ensuring that holding too many properties to increase demand is not
being practiced.

Real estate industry is one the biggest contributor to the employment of people. It
has become more organized and hence creating more professional jobs than ever.

There is huge opportunity for developers in the projects surrounding industrial area,
as government in encouraging companies to build their offices in India. Hence, new
offices will lead to new opportunity for developers.

References:
About Palava. (2018). Retrieved April 2, 2022, from
Palava: https://www.palava.in/residential/about-us

Company Profile. (2018). Retrieved April 3, 2022, from

Lodha Group: https://www.lodhagroup.in/about-us/about-company

Our Management. (2018). Retrieved April 2, 2022, from

Lodha Groups: https://www.lodhagroup.in/about-us/about-management

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10 reasons why the Real Estate sector is in a slump. (2019, August 19). Retrieved
March 10, 2022, from Morningstar: https://www.morningstar.in/posts/54373/whats-
causing-slow-real-estate.aspx

Housing demand fell 22% in H2 2019 amid slowdown in real estate market. (2019,
December 26). Retrieved March 05, 2022, from Business Standard:
https://www.businessstandard.com/article/companies/housing-demand-fell-22-in-h2-
2019-amid-slowdown-in-realestate-market-119122601190_1.html

Lodha Group SWOT Analysis, Competitors & USP. (2019). Retrieved March 20,
2022, from MBA Skool: https://www.mbaskool.com/brandguide/real-estate-and-
construction/6558-lodhagroup.html

What „Make-in-India‟ Means for Real Estate Sector. (2019). Retrieved March 1,
2022, from CommonFloor: https://www.commonfloor.com/guide/what-make-in-
india-means-for-real-estatesector-46614.html

Indian Real Estate Industry. (n.d.). Retrieved March 2022, from

I B E F: https://www.ibef.org/industry/real-estate-india.aspx

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